Prototype Carbon Fund Gemina Rice Husk Baseline Study 18/01/2005
The Prototype Carbon Fund
Baseline Study
for the Greenhouse Gas Component of the
Gemina Rice Husk Project
Revision 23rd May, 2002
Prepared by Bronzeoak Corporation under the Prototype Carbon Fund’s supervision
List of Contents
(1) Background and Purpose of the Baseline Study 8
(1.1) Background for Baseline Study 8
(1.2) Purpose of Baseline Study 8
(1.3) Baseline Selection Concepts 8
(2) Existing Rules for Baselines 10
(3) Principle Methodologies for Baseline Selection 11
(3.1) Baseline Methods 11
(3.1.1) Standard-Oriented methods 11
(3.1.2) Project-Specific methods 11
(3.2) Selection of Baseline Methodology 12
(3.3) Common Baseline Issues 13
(4) Description of Gemina Rice Husk Project 14
(4.1) Project Location and Country Background 14
(4.2) Gemina Rice and Flour Mill 14
(4.2.1) Basic Operational Characteristics 14
(4.2.2) Electrical Consumption and Cost 15
(4.3) Proposed Power Plant 15
(4.4) Environmental Impacts of the GG 17
(5) Nicaraguan Issues Related to the Baseline 18
(5.1) General Issues 18
(5.1.1) UNFCCC and Kyoto Protocol requirements 18
(5.1.2) National legislation 18
(5.1.3) Energy Sector and Climate Change 18
(5.2) Issues Applicable to the Electrical Generation Baseline 19
(5.2.1) Legal Constraints 19
(5.2.2) Technical constraints 19
(5.2.3) Political constraints 19
(5.3) Issues Applicable to the Dumped Husk Baseline 20
(5.3.1) Legal constraints 20
(5.3.2) Technical constraints 20
(5.3.3) Political constraints 21
(6) Selection of Baseline Approach and Additionality of GG 22
(6.1) Small Scale project 22
(6.2) Barriers to investment 23
(6.3) Evidence of the binding nature of these barriers 25
(6.4) PCF assistance to overcome the barriers 25
(7) Establishing the Baseline for Electric Power Replacement 26
(7.1) Interconnected Electrical System and GG Interaction with other Generators 26
(7.2) Electrical Supply and Demand 27
(7.2.1) Past Generation & Consumption 27
(7.2.2) Future Electricity Production and Consumption- 30
(7.2.3) Comparative Marginal Cost of Generation 31
(7.2.4) Will GG be likely to operate without restriction once built? 33
(7.2.5) Plant Costs, Dispatch Order and Emission Rates in 2000 35
(7.3) Time Dimension of Selected Baseline Scenario 35
(7.4) Electrical System Expansion Scenarios – Period 2003-2012 36
(7.4.1) Plausible Scenario 36
(7.4.2) Implausible Scenarios 39
(7.4.3) Electrical System Expansion Option 2013-2023 39
(7.5) Implausible Scenarios 2013-2023 39
(7.6) Use of Proxy Plant Approach 40
(8) Establishing the Baseline for Reduced Dumping of Husk 41
(8.1) Husk Disposal Baseline 41
(8.2) Past Husk Disposal Practices 41
(8.3) Disposal Scenario for Husk Dumping Baseline 42
(8.3.1) Husk Quantity 42
(8.3.2) Transport Related Emissions 43
(9) Establishing the baseline for substitution of rice husk ash for cement 44
(10) Indirect Emission Effects (Leakage) 46
(11) Calculation of Certified Emission Reductions 47
(12) Estimated CERs Over Project Lifetime 48
(12.1) CER’s from Avoided Electrical Generation (Low operating mode) 48
(12.1.1) Emissions of CO2 from electricity generation 48
(12.2) CER’s from Avoided Electrical Generation (Optimal operating mode) 49
(12.3) CERS from Avoided Husk Disposal (Low operating mode) 49
(12.3.1) CER’s from avoided transport of husks 49
(12.3.2) CER’s from avoided dumping of husks 50
(12.3.3) CER’s from avoided open husk burning 52
(12.4) CER’s from Avoided Husk Disposal (Optimal operating mode) 54
(12.4.1) CER’s from avoided transport of husks 54
(12.4.2) CERs from avoided dumping of husks 54
(12.4.3) CER’s from avoided open husk burning 54
(12.5) CERS from substituted cement with RHA – Optimal operating mode only 55
(13) Estimated CER summary for project lifetime 57
(14) Risks potentially affecting CERs and mitigation measures 58
(15) Additional sources of reference 60
Annex 1 Nicaragua Background 61
(A1.1) General information 61
(A1.2) Political background 62
(A1.3) Economic background 62
(A1.4) Social background 62
Annex 2 Background to the Electrical Sector in Nicaragua 64
(A2.1) Interconnected Grid 64
(A2.2) Past and Current Generation & Consumption 64
(A2.3) Organization & Institutional Framework 66
(A2.4) Transmission & Distribution 67
(A2.5) Electricity Market 68
(A2.6) Ownership of Power Plant 68
(A2.7) Deregulation process 69
(A2.8) Energy Policy and Strategy 69
Annex 3 Carbon Dioxide Emissions from Nicaraguan Power Plants 71
Acknowledgement:
This document was prepared with input and assistance from Bronzeoak Limited and Prolena, a Nicaraguan NGO. Information was also provided by Gemina-INA, the host of the proposed project, and other sources in Nicaragua.
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Prototype Carbon Fund Gemina Rice Husk Baseline Study 18/01/2005
Executive Summary
When operational in 2003, the Gemina Generador power plant (GG) will burn 2.75 tonne of waste rice husks per hour to generate up to 1,575 kW of electricity. Over the course of a year, depending on whether the plant only supplies on-site loads or supplies at full capacity on a near continuous basis, the husk consumption is predicted to fall in the range 15,000 tonne to 21,700 tonne.
The GG will be located at the Gemina rice and flour mill complex in Chinandega, Nicaragua. Currently the Gemina rice mill produces 18,000 tonne/year of husk. By 2003, following an expansion, the Gemina rice mill is predicted to produce 25,000 tonnes of rice husk waste.
The GG will result in a net reduction of green house gas (GHG) emissions to the atmosphere from two components:
§ First, the electricity produced will be used to substitute for electricity that would otherwise be produced using fossil fuels. This will result in a reduction of carbon dioxide emissions.
§ Second, the GG will largely eliminate the current practice of dumping of waste husks from the Gemina rice mill in open piles. This will reduce: the emission of carbon dioxide, from trucks that haul the waste, methane, from decomposing husk, and both methane and nitrous oxide emissions from the periodic burning of the piles to reduce volume.
The purpose of a Baseline Study is to consider possible approaches and then develop and justify reference scenarios (Baselines) for each GHG component of a proposed project. This document describes the development of baselines for the GG and provides information to justify their use. The intention is that future reductions of GHG emissions attributable to the GG can be derived in a transparent manner using the baselines and associated calculation procedures.
Since the methodology for Baseline Studies is relatively new and has not yet been formalized within the UNFCCC/Kyoto Protocol context, a broad range of possible baseline methodologies are first examined. Through a screening process the possible methodologies applicable to the GG case are then identified. Finally, those that were selected are explained, justified and used to define the baselines for GG.
In keeping with the requirements of the Kyoto Protocol for CDM projects, the Study examines the issue of project “additionality”. At the same time, taking into account the relatively small size of the GG, the Study seeks to produce a justifiable approach without unnecessary complexity and undue cost burden to the project.
The selected component baselines and their summary definitions are:
Electrical Generation Baseline
§ Divide the design life of the GG (2003 to 2023) into two periods – first period (2003 to 2012) and second period (2013 to 2023),
§ The electricity from GG reduces electricity that would otherwise be produced by a ‘proxy’ power plant fuelled by residual fuel oil,
§ GHG emission rates for the ‘proxy’ power plant will be applied to the quantity of electricity generated by GG to measure its GHG emission reductions,
§ For the first period fix the proxy emission rate at the ‘Nicaragua Unit 1 Power Plant rate (this power plant, and the similar Managua Power Plant, both burn Heavy Fuel Oil (HFO) and act as the supply/demand balancing plants on the Nicaraguan inter-connected grid),
§ Allow changes to the emission value of the ‘proxy’ plant emission rates at end of 2012 such that a revised ‘proxy’ plant can be used for the second period.
Husk Dumping Baseline
§ Assume husk produced, minus an allowance for possible sales, would be dumped if the GG wasn’t operating,
§ Assume that at six monthly intervals the dumped husk is burned,
§ Use GHG assessment guides to estimate the methane from decomposition and open burning, and the nitrous oxide from burning,
§ Use site data for diesel consumption and generic data for the emission rate, to estimate the transportation emission of carbon dioxide avoided by elimination of husk dumping
The baseline scenario builds on the assumption that the status quo ante continues to prevail. The approach selected to assess baseline emissions corresponds with paragraph 48 (a) of the Marrakesh Accords which states that project developers may choose historic or actual emissions to determine baseline emissions. Appropriateness of this choice is demonstrated by an analysis of barriers that are preventing the implementation of the project. Barriers are acknowledged to especially impact the realization of small-scale projects such as the Gemina power plant.
Although not strictly part of the task of producing the Baseline Study, this report also contains predictions of GHG reductions using the selected baselines. These are based on two possible scenarios: The low operation mode in which electricity is only sold to on-site consumers and the optimal operation mode which includes sales to off-site consumers (see Section 12.)
For the period, 2003 through 2012, the predicted annual reduction for the low operation mode is 10,971 tonnes CO2 and for the optimal operation mode, it is 17,409 tonnes CO2. These values are the sum of all GHG reductions adjusted to equivalent tonnes of carbon dioxide.
The GHG reductions estimated for the second period are subject to a larger margin of variation than during the first period. This is because of the possible revision of the proxy plant emission rate for electrical substitution during the second period.
Estimated annual emission reductions during the second period (2013-2023) sum to 9,335 tonnes CO2 for the low operation mode and 14,952 tonnes CO2 for the optimal operation mode.
Documents consulted and information used to develop the Baselines included:
§ reports published by MARENA, INE, CNE;
§ information from CNDC and INE;
§ guidelines published by World Bank (WB) and the Prototype Carbon Fund (PCF)
(1) Background and Purpose of the Baseline Study
(1.1) Background for Baseline Study
The Gemina Rice Husk project will convert waste husk from rice milling into electricity for use as a substitute for fossil fuel generated electricity. By using the waste husk in this manner, a substantial reduction in open site disposal of waste rice husks will result. The project is being developed by Bronzeoak Group and Gemina Group as co-developers. The Groups have agreed to form a single purpose Nicaraguan company to be called Gemina Generador S.A. (GG) that will become the legal entity for implementation and operation of the project.
The project is intended to operate as a Clean Development Mechanism (CDM) project under Article 12 of the Kyoto Protocol, to the United Nations Framework on Climate Change (UNFCCC) and as such will have to comply with all relevant UNFCCC and host country (Nicaragua) regulations.
(1.2) Purpose of Baseline Study
The purpose of this study is to develop and select a particular reference scenario for each greenhouse gas component of the Gemina Project and to explain the reasons for the selected baselines in a transparent manner.
The purpose of the Baseline Study is achieved by:
(a) defining and evaluating possible reference scenarios (baselines) for each GHG component of the Gemina Rice Husk Project,
(b) selecting the most appropriate baseline for each GHG component,
(c) defining, to an adequate degree of detail and in a transparent manner, the selected baselines,
(d) justifying the use of the selected baselines for estimating GHG emission reductions attributable to the Project,
(e) predicting the GHG emission reductions that the Gemina Rice Husk Project is expected to create.
(1.3) Baseline Selection Concepts
In order to quantify the emission reduction benefit of a CDM project a rational base case, or sequence of cases, which define the emissions of GHG that would have occurred in the absence of the proposed project, needs to be determined. The base case is referred to within the CDM procedure, as the baseline. It is a set of future circumstances that are altered by the implementation of the proposed project. It can neither be directly observed nor be proved to be correct beyond doubt and has been called a “counterfactual construct”.
When performing a baseline study, several possible baselines are generally identifiable. The aim of a baseline study is to select the baseline that reflects the most likely circumstances that would have occurred in the absence of the proposed project.
Since binding rules for the selection of project baselines have not yet been finalized by the UNFCCC Parties, baseline methodology and selection are currently being based on application of logical argument, as well as on the advice and examples provided by those already active in this field. To ensure a high probability that the GG and its GHG reductions will be accepted under Article 12 of the Kyoto Protocol, the selected baseline must, of course, be chosen so that a reasonably accurate prediction of GHG reductions can be expected. The baseline should be a conservative guess and should also be able to accommodate future changes[1].
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Prototype Carbon Fund Gemina Rice Husk Baseline Study 18/01/2005
(2) Existing Rules for Baselines
Although definite rules and modalities for CDM projects under Article 12 of the Kyoto Protocol do not yet exist, the Kyoto Protocol indicates criteria that baselines will need to meet in order to be acceptable:
– In Article 12. 5 of the Kyoto Protocol refers to the baseline issue as follows: ‘(b) Real, measurable, and long-term benefits related to the mitigation of climate change; (c) Reductions in emissions that are additional to any that would occur in the absence of the certified project activity’.[2]
The Kyoto Protocol establishes the requirement that Joint Implementation (JI) and CDM projects may only count emissions reductions that are ‘additional’ to what otherwise would have occurred in the absence of the certified project activity’. This process is termed ‘additionality’.
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Prototype Carbon Fund Gemina Rice Husk Baseline Study 18/01/2005
(3) Principle Methodologies for Baseline Selection
(3.1) Baseline Methods
Baseline methodologies generally fall into two categories: Standard-Orientated and Project Specific.